For many family business owners who are addressing their own personal succession planning, this will also involve consideration of their family business.
A family business can sit not only at the heart of an individual’s succession planning, but that one family business can feature in the succession planning of multiple family members across generations. It is rare that one asset can affect multiple members of the same extended family like this.
Is succession planning with a family business any different to mainstream succession planning? Inevitably, yes.
The combination of personal life and business life being so intertwined can be hard to manage. Then comes the potential spanner of external talent, which you may need to thrive or even survive.
Inevitably, this is likely to raise important questions, such as:
- how are key non-family members to be treated?
- will it be hard to attract talented staff if it is clear they can only progress so far unless their surname is above the door?
For many families formalising their plans, how they interact with each other, how they deal with decision making, and other such fundamentals can be set down in writing. While other companies may only plan for the next quarter or next financial year, family businesses can be thinking years or even decades ahead.
Family businesses must address concerns around longevity differently, considering the whole family’s wants – if the next generation feel compelled to enter “the firm”, what if they have aspirations elsewhere? The last thing a business needs is leadership which is disinterested, feels trapped, or even actively resents not being able to choose their future career path.
An important step is to bring the next generation into the planning and provide a platform where they can ask questions and raise ideas. This ensures they feel included and empowered. This platform may also identify potential rivalries in the family, areas where training would be beneficial, and issues of poor communication.
While the current leaders of the family business will wish to share their wisdom on how they have been successful, they should also be open to fresh ideas from younger generations. The way the first and second generations operated may no longer suit a changing market.
You must also be mindful of key personnel – would the death or incapacity of a key family member in the business cause the business to falter? If so, plan for that now, not later. Do not leave it too late to let the next generation experience the heart of the operation.
Active succession planning can also identify gaps in the business structure and these can be proactively attended to with a plan rather than senior leaders reactively panicking into a wrong decision. Although there may not be a “right time” to review your succession planning, you shouldn’t wait for an event or change to trigger your review. As with most things in life, the sooner the better!
When so much of your personal wealth and/ or family wealth is tied up in such an enterprise, it is even more important to bring the business into your personal planning. Taking advice to decide where on the scale of inertia through to radical action you may wish to sit is important. Set out a family business charter and have open conversations with those invested with you.